Morgan Stanley warned that the current rally is not the start of a bull market

Morgan Stanley


  • Wall Street has had a strong rally in recent weeks, but an analyst at the bank advised investors to be cautious.
  • The S&P 500 briefly topped 4,200 last week, its highest level since August 2022. This could be an area where investors sell to take a profit.
  • Morgan Stanley’s Michael Wilson commented that a resolution in the debt ceiling talks may push stocks higher in the near term, but “it would be like a false breakout/bull trap.”

The US stock market is going through a rally due to investor optimism about the agreement between the Republicans and Democrats to extend the debt ceiling.

However, Morgan Stanley’s Michael Wilson warned traders not to be fooled by the increases because the market has problems to deal with.

It is that the S&P 500 briefly exceeded 4,200 points last week, its highest level since August 2022 and this could be an area for investors to take profits.

Is this finally the breakout to confirm a new bull market? The short answer is no. There are a lot of technical signals and fundamental factors that conflict with that idea,” Wilson noted, citing lofty valuations, a limited array of stocks driving the rally, and the outperformance of defensive stocks.

Wilson is one of the most bearish analysts on Wall Street, and while he ranked first in last year’s poll of institutional investors for correctly predicting stock declines, he had also said the S&P 500 would plunge in the first few months of 2023. To date, the benchmark index accumulates a gain of 8.7%.

The expert clarified that a resolution in the debt ceiling negotiations may push stocks higher in the short term, but “it would be like a false breakout/bull trap.”

While there is another meeting agreed on Monday between President Joe Biden and the Speaker of the House of Representatives, Republican Kevin McCarthy, from JPMorgan they also believe that a period of high volatility for shares is approaching.

Still, Bank of America strategist Savita Subramanian remains bullish. She raised her year-end target for the S&P 500 to 4,300 points, about 2.6% above Friday’s close.